Penalty rates are critical for younger workers

Federal Labor MP Kelvin Thomson recently stirred the possum by noting that the supporters of cutting weekend penalty rates mostly work from 9am to 5pm, Monday to Friday.

Mr Thomson told the Restaurant and Catering Industry Association that he did not share their view that cutting penalty rates would generate jobs.

He argued that pay cuts reduced spending power and most young people already do not receive penalty rates, even though they were entitled to them.

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“Your letter referred to changing social norms around weekend shopping times, a reduction in religious observance and a softening of trading hour restrictions,” Mr Thomson wrote. “It said the penalty rate system needs to be brought into line with changed community expectations.”

Mr Thomson joked that he called the Association’s public affairs manager on a Saturday to discuss their campaign to cut penalty rates, but got no answer. Ditto for a second call on a Sunday.

“Perhaps there is still some magic left in Saturdays and Sundays after all,” he wrote.

construction workers

Workers relying on weekend penalty rates are paying close attention to the current debate.

Jokes aside, most Australians do not work on Sundays, which remains a day of leisure for most Australians, even if fewer attend church.

About one in five employees work on a Sunday, compared to around four in five on weekdays.

Times have changed – particularly in the digital era – and so have patterns of work, leisure, and shared family time.

And it’s reasonable to ask why many awards include higher penalty rates for working on Sundays.

Indeed, the Fair Work Commission last year cut the Sunday penalty rates from 50 per cent to 25 per cent for lower skilled restaurant workers. With the existing 25 per cent casual loading, these workers will get a 50 per cent loading on Sundays rather 75 per cent.

A crucial argument of employer groups and the Turnbull government is that paying penalty rates inhibits job growth and squeezes profits, even forcing many businesses to stay closed at busy times or even go out of business.

These arguments are being hotly contested in a review of penalty rates that is now underway before the Fair Work Commission, a process that will continue into early next year.

So far, employers are struggling to prove that cutting penalty rates would be a job creator, although it would help boost profit margins.


Waiters, baristas and other workers are at risk of a Sunday pay slashing. Photo: Shutterstock

Penalty rates are important in industries that rely on the awards to set pay and conditions, such as accommodation and food services, and retail trade.

This year’s review of minimum wages noted that gross operating profits were hit by the decline in mining over the 12 months to the December quarter.

However, after you strip out mining, the gross operating profit for accommodation and food was strong. Profit in retail was above the average.

Employment was growing at a “significantly higher rate” in accommodation and food services and at the all-industry average for retail.

So where is the economic evidence that penalty rates is inhibiting employment and that cutting them would increase employment?

I have sympathy for small to medium businesses who are trying to make a crust, many of which rely on family labour to continue.

As the Fair Work Commission has previously noted, profit margins in the restaurant industry are relatively low, with a relatively high rate of business failure.

“This is major part a function of an industry which is intensely competitive, is made up of predominantly small businesses, contains an oversupply of businesses and has low barriers to entry.”

Yet most restaurant and café workers are already low-paid. About half of them are casuals, more than half are women and almost one-third are students.

As the parent of a university student and a teenager, I agree with Kelvin Thomson that many young people already do not receive penalty rates even though they are entitled to them.

As shown by the revelations at 7-Eleven franchises, many employers also undercut the minimum wage and youth wages by employing overseas students and visa workers.

But requiring the payment of penalty rates for weekend work and public holidays at least sets a benchmark in the market, even if many bypass it.

It’s good to live in a country where restaurant and café workers do not have to rely on tips to get by.

Mark Skulley is a freelance journalist based in Melbourne. He was a reporter for The Australian Financial Review for almost 19 years, which included a decade covering national industrial relations and the world of work. View all of his columns here.


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